NCPA - National Center for Policy Analysis

No Sidestepping Agriculture Reform

August 17, 2012

Congress should end farm subsidy programs in favor of a modern market-based agriculture policy, say Diane Katz, a research fellow, and Emily J. Goff, a research associate, at the Heritage Foundation.

The underlying purpose of current farm policy is to shift the costs of agriculture risk to taxpayers, by either augmenting farmers' income or artificially inflating commodity prices. But dramatic changes in the agricultural landscape have made agriculture far more resilient while also providing farmers with a variety of private-sector options to break free of dependence on government. The spectacle of drought-stricken ranchers clamoring for a taxpayer rescue underscores the reform imperative.

Drought is tough on farmers, to be sure. But the lack of rainfall and searing temperatures will not ruin the agriculture sector.

  • The U.S. Department of Agriculture (USDA) estimates that taxpayer-subsidized insurance covers more than 80 percent of the farmland in major field crops.
  • Meanwhile, the farm sector in general is robust from years of record revenues and debt reduction.
  • Net farm income hit a record $98.1 billion last year and is forecast by the USDA to reach $91.7 billion in 2012 -- the second highest level on record.
  • Additionally, the top five earnings years during the past three decades have all occurred since 2004.

The USDA has taken some steps to ease the effects of the drought.

  • For example, the agency has "streamlined" its processing of disaster designations and lowered the interest rates on emergency loans from 3.75 percent to 2.25 percent -- the first change since 1993.
  • The USDA is also opening more federal land to livestock and lowering the payment rate.

Farming is risky, but so are all other entrepreneurial endeavors. There are also rewards to balance the hardships. As it is, farm subsidies, commodity quotas and tariffs largely enrich upper-income producers of grains, oilseeds, cotton, milk and sugar, and ignore most other commodities. It is time for farmers to assume responsibility for their business, just as business owners do in every other sector of the economy. A variety of options exist, including diversifying product lines, buying insurance at market rates, leveraging assets and maintaining cash reserves.

Source: Diane Katz and Emily Goff, "Farm Bill Tango: No Sidestepping Agriculture Reform," Heritage Foundation, August 1, 2012.


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